Fiat shares shed 11pc on plan financing

FIAT shares sank more than 11 per cent on Wednesday as investors expressed scepticism over a new business plan to launch Fiat Chrysler Automobiles as a leading global player.

Analysts said that the ambitious plan to invest 48 billion euros ($A72 billion) to boost volumes to seven million by 2018 from 4.4 million last year, failed to adequately address the financing requirements.

The plan does not include a capital increase and the company left its options open, including the possibility of a convertible bond.

CEO Sergio Marchionne emphasised that cash-generating Ferrari was not for sale - a topic of frequent market speculation - and that an initial public offering was not imminent.

Bernstein analyst Max Warburton said Fiat's first-quarter results, which showed losses widening, "provided a sobering reminder of the fragile foundations on which FCA must build its ambitious plans".

Expressing reservations over its business plan, Warburton noted that Fiat "is weighed down with huge debt, burdened by financing costs and is only thinly profitable".

Meanwhile, Mediobanca analyst Massimo Vecchio called the plan "challenging, but achievable" and said he expected clarification on the capital structure after the new company is listed in New York and Milan, expected by October 1.

Vecchio said Marchionne made clear a capital increase "would be prudent," but any decision to pursue one through a corporate bond issue was complicated by the company's stock performance, which the CEO said was undervalued.

Fiat shares, which had gained more than 40 per cent since Fiat announced the deal on January 1 to take full control of Chrysler, closed on Wednesday at 7.48 euros.

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